This is a partial transcript from Your World with Neil Cavuto, January 8, 2003, that was edited for clarity. Click here for complete access to all of Neil Cavuto's CEO interviews.
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NEIL CAVUTO, HOST: Lennar Corporation, one of the largest homebuilders in the U.S., beat Wall Street estimates Wednesday. The Miami-based builder said that its fourth quarter earnings rose 38 percent due to relatively low interest rates and certainly a healthy demographic driven demand. How does the company plan to move ahead?
Let's ask Stuart Miller, Stuart is the president and CEO of Lennar Corporation. And he joins us from Miami.
Stuart, good to see you, happy New Year.
CAVUTO: Thank you sir. Let's get right to it. Numbers look great across the board. I always raise this with you every time I have you on, as I do with the guys who head Toll Brothers and Hovnanian and all these others. How long can it last? How long can it last?
MILLER: Well, that's certainly the question that has been out there for some time. And, it seems be asked just about every year. And the home building market seems to keep clipping along. The fact is that home building is not just interest rate driven, it is demographics driven. We see seem to have demand in the 1.7 million home per year kind of level -- at that kind of level it seems to be sustainable through this decade.
CAVUTO: All right. But yet we have reports out now, as you know, that show foreclosures are running up a little bit. They're not at markedly high rates but they are still a little disturbing. Is that a worry sign for you?
MILLER: I think it's a sign of some worry. But the fact is that Americans still want to own a home, people have to have a place to live. And we are going to have to satisfy that demand. And, there might be a little bit of falloff along the way but we have strong demand through the rest of the decade.
CAVUTO: All right. Now you were actually particularly strong in Florida which is one of the growing demographic markets. So you don't seem as vulnerable in some of the overheated areas in the northeast or out in the extreme West Coast. Is that by design?
MILLER: Well, actually a large part of our business is on the West Coast as well. We are very strong all the way through Sunbelt and along Eastern Seaboard. So we do have exposure to those markets, but we think that the entire country is remaining pretty strong right now.
CAVUTO: So when you see, Stuart, out of the president, his new proposal to sort of goose the economy, does that help you?.
MILLER: Well, there is no question that anything that flows dollars back to the pockets of Americans is going to help people buy homes, and to realize American dream of home ownership. So we think it's going to be a boost to our business as well.
CAVUTO: Still, you know, it's always interesting to me, Stuart, that your stock and so many of these other relatively high flying housing stocks trade at single-digit multiples way below the market average. And I know that has always been the bane of the existence for you guys. But why is that? Is Wall Street telling you something?
MILLER: Well, I think that Wall Street is sticking to an old tradition of looking at the home builders as very cyclical. And as you looked in '60s, '70s and '80s, there was a lot of cyclicality in the industry. I think we have outgrown that by the way that we run our businesses, by the way that we are capitalized. And I think that demographics augur in favor of home builders remaining very strong. And I think that Wall Street just hasn't caught on the longer they listen to the story and see the consistency, I think you're going to start to see multiples expand as well.
CAVUTO: Do you see a threat of higher interest rates if we revisit these deficits and all of a sudden people who were able to afford these homes, yours included, might not be able to afford them or buy them?
MILLER: Well, I think that an economic recovery is likely to bring on some moving upward of interest rates. But nonetheless we think that a recovery in the economy is going to also boost consumer confidence and household formation through job formation, and therefore that is going to make up the difference between people who can't afford because of interest rates, and people who can afford because of new job formation and consumer confidence.
CAVUTO: Stuart Miller, good seeing you again, thank you. The Lennar president and CEO, Stuart Miller.
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